Top 2 European ETFs

With energy prices on the mend, and the euro up 7.3% against the USD over the past one month Europe seems to have a solid path ahead. Europe now seems to have a bullish story.

euro_usd

Economic Status of Europe

The European Commission has now upgraded Euro zone economic growth to 1.5% for 2015 from 1.3% guided three months earlier. The Commission now expects inflation of 0.1% in 2015 versus 0.1% of decline projected earlier. However, the forecast for 2016 is reiterated at 1.9%. The year 2016 is likely to see inflation of 1.5%, slightly up from 1.3% expected previously. 

The Commission upgraded the job growth outlook. For 2015 and 2016, joblessness in the Euro zone is expected to be 11% and 10.5% respectively, down from previous projection of 11.2% and 10.6%.

ETFs for Europe

To invest in Europe without the fluctuations of the Euro, two ETFs stand out – HEDJ, DBEU.

europe_etfs_price

Both the ETFs have been on a steady increase from the start of the year and have been moving in the same direction. Analysing these ETFs on price return. HEDJ has given a better price performance as compared to DBEU. Even though the one day price return is down, it might be a good entry point given the fact that the US 10 yr yields are going up signalling inflation and interest increase in the US. 

etf_eu_peer

 

On volatility comparison, HEDJ is slightly more volatile.

etf_eur_vol

With HEDJ attracting higher average fund flows, HEDJ is a Consumer non durables focused ETF with investments in France and Germany.

HEDJ      
Sector   Countries  
Consumer non durables 23.00% France 26%
Finance 11% Germany 20%
Manufacturing 11% Spain 18%
Health & Technology 9% Netherlands 14%

 

While DBEU, focuses on the finance sector with investments in UK and Switzerland primarily.

DBEU      
Sector   Countries  
Finance   UK 21%
Consumer non durables   Switzerland 13%
Health and Technology   Germany 13%
    France 11%

 

European ETFs with a currency hedge would be a good investment when Europe’s fiscal initiatives are working.

Leave a Comment